Out of the box Buy or rent a house
Is it better to buy or rent a house?

Most people think that it is better to buy a house to stay in. They lock in their housing cost and also have an appreciating asset. 

This is no longer the case. 

House prices have gone up so high. It cannot continue to go up at a high rate. We have now reached a point where house prices have reached its peak and will, at best, remain stable. There is also the likelihood that the prices may drop. 

The alternative is to rent a house. 

However, this carries its risk as well. The rental may escalate in some years, making it unaffordable. 

What is a better alternative?

It is better for allow the tenant to rent a property for 10 years at a rental that is fixed at the state and adjustable annually based on an index.

At the end of 10 years, the tenant can renew the lease at the market rate, or lease a bigger or smaller house, to suit the needs of the family. 

This is a better arrangement than to buy a big house at the start, to prepare for a large family. This may be too costly. 

The home owner may buy a smaller house and sell it later to buy a larger house. However, the cost of buying or selling a house is high. This can be avoided using the 10 year rental arrangement. 

What happens if the tenant need to give up a lease before the expiry. The tenant will have to pay a penalty that is determined in advance, and takes into account the market condition. This is to protect both the landlord and tenant and ensure that the penalty is fair.

What about giving ordinary people the opportunity to invest in property?

They can invest in a real estate trust (REIT), which owns the houses or apartments that are rented out to the tenants. 

I wish to offer this concept of a 10 year lease, as an alternative to buying a property to live in, or take the risk of short term rental.

Tan Kin Lian

Vote - do you like this concept?

 

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